Merritt Personal Lines Manual: Part I: Standard Health Insurance Provisions

Basic coverage is frequently supplemented by "major medical coverage," which provides high levels of benefits for serious injuries and diseases. The term "major medical coverage" is generally used to refer to benefits characterized by high limits of insurance (frequently $500,000 or $1 million), copayments (a percentage of covered expenses paid by the insured) and a "stop loss" feature (a maximum amount paid by the policyholder, above which the insurance company pays 100 percent of additional covered expenses).

Major medical coverage provides high levels of benefits for serious injuries and diseases. Different insurance companies offer different variations of major medical plans. Some issue policies that have a lifetime maximum benefit for each insured. Some issue policies that have a maximum benefit amount for each injury or sickness. Some major medical policies have a fixed copayment percentage (20 percent being most common), while others have a "sliding scale" for benefits (the copayment changes for additional layers of covered expenses). However, the major medical concept and significant features (high limits, copayments and stop loss) are found in nearly all plans.

Most health insurance policy forms contain many of the same definitions, limitations, exclusions and general provisions. Rather than duplicate these standard provisions in separate policy forms, we will review the most common provisions first in this chapter.

Then, we'll review selected policy provisions from a Basic Hospital Expense Policy and a Major Medical Expense Policy in succession.

While we won't review managed-care plans (HMOs and PPOs) or group master policies, most of the same issues we discuss and much of the specific language apply to those forms of health insurance. Where applicable, we'll look at case studies that involve them.